China Struggles With Commodities Oversupply

Yolowire 8-Feb-2024 10:09 AM

China is facing a massive oversupply of %Commodities that could exert downward pressure on global prices in the coming months.

While most countries around the world continue to grapple with inflation, or rising consumer prices, China has entered a period of deflation, with consumer prices falling in January of this year at the fastest pace since the 2008-09 financial crisis.

The deflation is largely being blamed on an oversupply of commodities ranging from agriculture products to energy and metals in the nation of 1.4 billion people.

Due to abundant supplies, prices for agriculture goods in China plunged 5.9% year-over-year in January, with pork and grain prices registering the steepest declines.

At the same time, record imports of coal and oil heading into the winter months have left Chinas energy market oversupplied.

Warmer weather and weak industrial output have left the country with a glut of coal, oil and natural gas, according to government data.

As the worlds largest importer of crude oil, the current situation in China threatens to impact energy prices in coming weeks and months.

Metals are also problematic with a 16-month price slump for most industrial metals, including those used in %ElectricVehicle manufacturers such as China based %NioInc (NYSE:NIO), hurting exports from China and leading to oversupply.

Chinas government in Beijing has promised to provide stimulus to boost the countrys slowing economy. However, officials are currently distracted trying to bolster the nations slumping stock market, which is leading to a full-blown crisis of confidence.

As the worlds second-largest economy after the U.S., and a leading producer of commodities, China has an outsized impact on global prices and markets.

COMTEX_447497582/2797/2024-02-08T09:57:35